The Department of Internal Affairs

Te Tari Taiwhenua | Department of Internal Affairs

Building a safe, prosperous and respected nation



 

Regulatory system information: Charities

Description of the regulatory system

System objectives/purposes

The charities regulatory system aims to:

  • Promote public trust and confidence in the charitable sector
  • Encourage and promote the effective use of charitable resources
  • Provide for the registration of societies, institutions and trusts as charitable entities
  • Require charitable entities to comply with certain obligations
  • Provide for an independent Board to make registration and deregistration decisions
  • Provide for the Chief Executive (or delegate(s)) to carry out certain functions (including educating and assisting charities in relation to matters of good governance and management, monitoring charitable entities and their activities, and inquiring into alleged serious wrongdoing involving charitable entities)

Key statutes

Charities Act 2005

Key regulations

Charities (Fees and Other Matters) Regulations 2006

Brief description of what the system does

Charitable entities can voluntarily apply to be registered under the Charities Act 2005. Registration and deregistration decisions are made by the independent Charities Registration Board, Te Rātā Atawhai, appointed by the Minister for the Community and Voluntary Sector. Charities Services in the Department of Internal Affairs makes many registration and deregistration decisions under delegation from the Board.

Registration brings with it benefits (including being exempt from income tax on all or some of the entity’s income) and obligations (including reporting financial information annually to Charities Services). The benefits of registration occur not because of provisions in the Charities Act 2005, but rather because of a range of provisions in other legislation and instruments – for instance, the Income Tax Act 2007.

Information about registered charities is available, free of charge, on a publicly accessible online charities register. This information includes financial and non-financial performance information that registered charities must prepare using reporting standards set by the External Reporting Board.

Inquiries into registered charities’ activities are undertaken where:

  • there is possible serious or deliberate non-compliance with the provisions of the Charities Act 2005, and/or possible serious wrongdoing (which includes fraud or gross mismanagement); and
  • an inquiry or investigation is appropriate based on our assessment of the nature and level of the risk relating to the issue or allegation.

There are over 27,000 registered charities in New Zealand, with a combined annual income of around $18 billion and total expenditure of around $17 billion. The total asset base of all registered charities is around $58 billion. Approximately 230,000 people volunteer each week for registered charities. These entities also employ around 93,000 full-time staff and 90,000 part-time staff. 

Agencies involved in the charities regulatory system

  • The Department of Internal Affairs (the Department) has both policy and delivery responsibilities under the charities regulatory system.
  • The independent Charities Registration Board also has delivery responsibilities.
  • The Inland Revenue Department has regulatory and policy functions for the Income Tax Act 2005.
  • The Ministry of Business, Innovation and Employment (MBIE) has regulatory and policy functions for incorporated societies and charitable trusts (many of which are registered charities).
  • The External Reporting Board (XRB) sets financial and non-financial reporting standards for the charitable sector.
  • The High Court considers appeals against decisions of the Charities Registration Board.

Department of Internal Affairs and Inland Revenue staff meet regularly to foster collaboration. Formal Memorandums of Understanding are in place to govern these relationships and sharing of information.

Department of Internal Affairs staff also meet with the XRB and MBIE officials to discuss and collaborate on areas of shared interest.

Regulated parties and non-government stakeholders

  • Registered charities
  • Umbrella groups that represent the interests of registered charities
  • Professionals providing support and advice to registered charities
  • Donors, funders and members of the public that use services provided by registered charities.

Engagement between system agencies and regulated parties

The Department holds annual meetings with the charitable sector to discuss key developments and plans for the year ahead. Anyone with an interest in the charitable sector can attend.

The Department also convenes a Sector User Group (or SUG) to provide valuable insights into the work of, and pressures facing, the sector. The SUG is a group of over 20 organisations that provide broad representation from the charitable sector and professionals that support the sector. We meet formally a couple of times a year to discuss issues, and to seek input from the sector into the Department’s work.

The Department also meets regularly with umbrella groups and others interested in the sector.

Fitness-for-purpose assessment

Reviews/assessments of the charities regulatory system

In 2018 the Minister for the Community and Voluntary Sector, Hon Peeni Henare, announced a project to modernise the Charities Act 2005. The purpose of the project is to ensure that the Charities Act is effective and fit for purpose. The comprehensive legislative review will focus on substantive issues arising under the Act, while recognising and building on the Act’s strengths. 

The Policy Group in the Department is leading the modernisation project according to this indicative timeline. More details, including the terms of reference for the project, can be found on the Department’s website.

Review phase

Indicative timing

Key activities

Consultation

Late Feb – May 2019

Discussion document released

Public consultation

Policy

May – late 2019

Submissions on the discussion document reviewed

Policy proposals developed for Cabinet approval

Legislation

Late 2019 onwards

Develop draft legislation

Bill to amend the Charities Act progresses through Parliament – this will include a select committee process where public submissions can be made on the Bill’s provisions.

Review/assessment findings

The project to modernize the Charities Act that is currently underway will highlight any concerns that need addressing, in terms of effectiveness, efficiency, durability/resilience, and fairness/accountability of the regulatory system.

Plans for regulatory and operational improvements

Key regulatory changes planned for 2018/19

No regulatory amendments are planned for 2018/19, as a review of the Charities Act is currently underway. There are no pressing issues that need to be addressed in the meantime.

Key service design and operational changes planned for 2018/19

  • Work will progress on a project to better support good governance in the charitable sector. During 2018/19 the Department will produce resources and guidance to help charities improve their governance, and make these easily accessible to all. We will continue to engage with representatives from the sector to ensure the resources are useful and fit-for-purpose. Further information is available on the Charities Services’ website: https://www.charities.govt.nz/news-and-events/blog/update-on-our-governance-project-december-2018/
  • The Department will continue its focus on being a more modern, responsive, risk-based regulator. We will target our resources on harms that have the potential to adversely impact on public trust and confidence in the charitable sector and threaten the effective use of charitable resources. 
  • The Department will introduce several improvements to our processes and systems, including:
    • improvements to the Charities Services’ website so that it is easier to navigate and contains information that is clear and relevant
    • a new ‘charity logo’ that registered charities can use to help them promote the fact that they are registered
    • publishing model rules, to help new charities (and existing charities that are changing their rules) ensure their rules documents cover all the relevant areas
    • a more streamlined process for charities that are re-registering.